'In corrupt systems, decent people have two options: conform or be crushed'

According to Vince Cable, the emergence of a new breed of 'decent' bankers will guard against further financial outrages. But until we recognise that the system itself is flawed, banks will go on turning ordinary workers into shameless shysters and get-rich-quick merchants

Allied Irish Bank, where whistle-blowers were either dismissed or marginalised. Photograph: Peter Morrison/AP

'In corrupt systems, decent people have two options: conform or be crushed'

According to Vince Cable, the emergence of a new breed of 'decent' bankers will guard against further financial outrages. But until we recognise that the system itself is flawed, banks will go on turning ordinary workers into shameless shysters and get-rich-quick merchants

Saturday 30 June 2012 16.00 EDT
First published on Saturday 30 June 2012 16.00 EDT

Spivs! Wideboys! Riverboat gamblers! Snakeoil salesmen! Calling the shysters by their proper names is satisfying – and it may be the only satisfaction the public will get. But it is also, oddly enough, rather naive. For it assumes that better, more decent people wouldn't end up manipulating interest rates or mis-selling financial products.

All the evidence from the many scandals of recent years is that it is not sociopaths who create rotten cultures. It is closed, arrogant, unaccountable cultures that turn ordinary people into sociopaths. Put a young Mother Teresa, Nelson Mandela or Saint Francis of Assisi on the trading floor of Barclays and you can bet (at carefully manipulated odds) on how long it will be before they're up to their necks in scams and spivvery.

And yet a Hollywood-style myth of personal redemption clings on. The well-meaning Vince Cable told Channel 4 News on Friday evening that "greed and corruption pervades substantial parts of the banking system" and that institutions such as Barclays Capital are "rotten to the core".

Both phrases rightly suggest that the problems are fundamental and institutional. But the business secretary then concluded with an optimistic appeal to personal moral revival as the key to reform: "There are enough decent people now coming through the banking system… who are not part of this [rotten culture] to make this kind of long-term change possible."

This is the grand illusion: that "decent people" will make all the difference. We know that in corrupt systems, decent people end up with two options: conform or be crushed. Happily for human nature, there are always good, moral people who look at what's happening around them and decide that they can't live with themselves if they go along with it. Unhappily for human society, such people are almost always bullied, marginalised and destroyed. In bad systems, the decent person is the freak, the oddball, the awkward crank who is not a team player, not one of us.

In one of the banks that brought down the Irish economy, Allied Irish Bank, for example, three successive chief internal auditors went to the board with deep and precise concerns over corrupt practices they had uncovered. Each in turn was dismissed or marginalised. In one case, the bank even managed to blame the whistleblower for the corrupt practices he had uncovered.

This is what bad systems do: they reward the compliant with tribal approbation ("Done, for you big boy") and recast conscience as negativity. They invert altruism, using the instincts of decency – working co-operatively, being "in this together", upholding a communal ethic – to normalise sociopathic behaviour and make decency despicable.

Even good intentions are useless in such a world. Consider, for example, the Catholic bishops who ended up colluding with predatory paedophiles by shifting them from parish to parish. These are all men trained for many years in moral thinking. All of them, perhaps, dreamed of being saints in the same way that other boys dreamed of being footballers. Most of them are individually decent, compassionate and well-intentioned men. Yet they ended up enabling and covering up the most horrific crimes against children.

Why? Because they had too much power. Because they had to account to no one outside of their own institution. Because they had a fierce loyalty to their colleagues. Because they didn't want to be the one who betrayed the tribe. Because what might have seemed outrageous the first time you did it gradually became normal. And because they could convince themselves that, really, it was all in the service of a higher moral purpose.

Bankers are no different – in fact, the parallels are striking. They, too, deal in arcane mysteries whose meaning is denied to the uninitiated. They, too, have a hotline to the Supreme Being or as we now call him, the Market. They, too, operate within closed worlds which generate their own norms and a feverish tribal loyalty. They, too, have their acolytes and true believers – in this case, economists and politicians – to reassure them that their most appallingly self-serving behaviour is in fact for the greater good. An entire ideology tells them that vicious greed on the personal level translates miraculously into a collective social and economic good.

There is another parallel between bankers and churchmen, too. Each has been above the law. Or rather, each has its own internal system of laws: canon law for the clergy, financial regulations for the bankers. These systems become, in reality, substitutes for the basic common understanding of criminality. Assist a paedophile in ordinary society, and you can expect, if caught, to have your collar felt. Steal a million quid from a small business and you're going down. But do these things within the bounds of your own internal codes, and crimes become technical offences. Shame is minimised; consequences are softened.

What can be done about this? Everyone talks of the need, in Mervyn King's expression, for "a real change in the culture of the industry". But "culture" has a fluffy feel. It suggests that we are dealing with the strange practices of exotic tribes who stick bones through their noses or paint themselves blue. It implies that we should call in the anthropologists rather than the police.

There is nothing at all exotic about the culture of sophisticated scam merchants. Political philosophers have long known that when people have the power to get away with anything, they will try to get away with everything. Two and a half thousand years ago, Plato told the story of Gyges, who finds a ring that makes him invisible. Within weeks, he has turned from innocent shepherd into corrupt monster.

Bankers have Gyges's ring of invisibility. Most of society can't see what they're doing. They enjoy virtual impunity for acts that harm other people and society as a whole.

But there's an added twist: not alone can they not be fully seen, but they themselves cannot see. The bonus culture and the grotesque inequality it sustains create a disconnection from everyday society. Nothing out there is real: clients are just more inputs for the profit machine; interest rates are just numbers to feed bonuses.

Decent people will always be eaten up by such an indecent system. The real challenge is to recognise that its indecency is not accidental but inherent. These institutions are too big, too justifiably arrogant, too often fawned over by intellectual and political lackeys and too detached from democratic and social values. They brought the world to the brink of economic collapse and survived with little real change. Unless democracies force them to do otherwise, they will rightly expect to ride out these smaller scandals.